Cisco Profit Tops Street, To Cut 5,500 Jobs

(RTTNews) - Cisco Systems Inc. (CSCO), the world's largest computer networking gear maker, Wednesday reported a 21 percent jump in fourth-quarter profit that also trumped Wall Street estimates. Cisco also said it will eliminate 5,500 employees as part of its restructuring from a hardware to software company.

San Jose, California-based Cisco's fourth-quarter profit rose to $2.81 billion or $0.56 per share from $2.32 billion or $0.45 per share last year.

Adjusted earnings improved to $0.63 per share from $0.59 per share last year. On average, 30 analysts polled by Thomson Reuters expected earnings of $0.60 per share. Analysts' estimates typically exclude special items.

Cisco, which makes routers and switches, said revenues for the fourth quarter dropped slightly to $12.64 billion from $12.84 billion last year. Analysts had a consensus revenue estimate of $12.57 billion.

Commenting on the results, CEO Chuck Robbins said, "We had another strong quarter, wrapping up a great year. I am particularly pleased with our performance in priority areas including security, data center switching, collaboration, services as well as our overall performance, with revenues up 2% in Q4 excluding the SP Video CPE business."

Cisco is viewed as a technology-industry bellwether because it dominates the market for routers and switches. Cisco CEO Chuck Robbins, who took over the reigns of the company last summer, has aggressively pursued acquisitions to expand the company's market.

Moving ahead, the company expects first-quarter adjusted earnings of $0.58 to $0.60 per share. Analysts currently estimate earnings of $0.60 per share.

The company also announced that it will eliminate up to 5,500 positions, representing about 7 percent of its global workforce, and will take action under the plan beginning in the first quarter of 2017.

Cisco said the restructuring will help the company to "optimize cost base in lower growth areas of its portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data center and cloud."

Cisco reportedly expects to record pretax charges of up to $700 million in severance and termination benefits.

CSCO closed Wednesday's trading at $30.72, down $0.40 or 1.29%, on the Nasdaq. The stock further dropped $0.36 or 1.17% in the after-hours trade.